The Problem With UEFA Financial Fair Play Regulations – Published in FC Business Magazine
UEFA describes the purpose of its financial fair play rules as “… improving the overall financial health of European club football.” The only problem is that many of its members and stakeholders are not so sure, with critics contending that it is an anti-competitive set of rules that entrenches the existing inequalities between clubs.
Today’s UEFA Club Licensing and Financial Fair Play Regulations (“FFP”) which were updated in June 2015 began life in 2010 and had its first assessment in 2011. Since then clubs wishing to participate in UEFA competitions were required to demonstrate that they are not carrying overdue football creditor debts and social/tax liabilities.
From 2013 the clubs were additionally assessed against break-even requirements which required them to balance their spending with their revenues and restricted them from accumulating debt. In establishing compliance, UEFA’s Independent Club Financial Control Body (“CFCB”) each season will take into consideration three years’ worth of club financial figures.
Generally clubs can spend up to €5m above their revenue for the assessment period of three years. This level can be exceeded to a certain limit provided the overspend is entirely covered by a direct contribution from the club owners. The limit for the 2013/14 and 2014/15 season was €45m whereas the limit for the 2015/16 until the 2017/18 season is reduced to €30m.
From 2015 investment in stadiums, training facilities, youth development and women’s football are excluded from the break-even calculation. Further, the role of the CFCB is expanded to include clubs not yet qualified for UEFA competitions but who aspire to participate at some stage in the future.
There are nine specified possible sanctions for non-compliance, ranging from warning; reprimand; fine; points deduction; withholding of revenues from a UEFA competition; prohibition on registering new players including a cap on aggregate player wages; disqualification from competitions and withdrawal of a title award.
Since FFP came into force in 2011, six clubs have been denied access to UEFA competitions because they have either failed to pay players wages or fees to other clubs for transfers and one club has been excluded from UEFA competitions for failure to comply with break even requirements. In 2013/14 season, nine clubs and in 2014/15 season 14 clubs entered into Settlement Agreements with UEFA due to FFP breaches.
One criticism of FFP is that it is a rule that is designed to protect the rich whilst disenfranchising the poor. Critics argue that FFP it entrenches the existing financial inequalities in European football where the rich will continue to become richer and poorer clubs are denied the opportunity to attract investment that could enable them to challenge the richer clubs.
In this context it can be seen that the outcomes of most leagues in Europe including UEFA’s Champions League are predetermined and are usually dominated by the same rich clubs almost every season. So for example, in the Premier League no other club outside of the usual top 4 of Arsenal, Manchester City, Manchester United and Chelsea have won the Premier league in the last 20 years. The same pattern is repeated in Spain, Germany and Italy and inevitably it is clubs from these football rich nations that dominate the UEFA Champions League. Thus, European football operates on a pyramid class system. As a result FFP is justifiably criticised for denying mobility, deterring investment and effectively limiting competition from new entrants and specifically neutralising circumstances where new investment could transform otherwise modest football clubs by providing them the resources to challenge the established order.
Therefore it is not surprising that FFP has been beset by legal challenges. At the time of drafting this article, the European Court of Justice has just handed down a ruling rejecting the referral brought about by the Brussels court of first instance that the ECJ adjudicate on the interpretation of EU law provisions in the lawsuit filed by agent Danielle Striani against FFP. The ECJ described the request as “manifestly inadmissible”, in respect of which UEFA promptly announced its satisfaction with the ruling.
This euphoria may however be premature given that the ECJ decided to refuse the request on a legal technicality; the basis of the failure of the referring court to meet its procedural requirements in the way in which the questions were put to the ECJ.
Quite clearly the court has yet to consider the matter referred to it substantively and it is entirely open to the Brussels court to correct the procedural deficiencies in its referral and submit a new referral. The challenge to the FFP rules relies upon its alleged incompatibility with EU competition provisions as well as several of the EU Single Market core freedoms and a substantive ruling by the ECJ on the issues raised is desirable.
It is noteworthy that the applicant, Danielle Striani, whose locus standi in challenging the rules designed to regulate clubs financial conduct rather than agents financial conduct might well come under scrutiny. To that extent, aggrieved club or clubs that contend that they are being discriminated against in the investment markets as a direct result of the FFP rules joining his challenge might be invaluable.
The foregoing notwithstanding, UEFA acknowledges that the disparity in wealth between football clubs even operating in the same league predated the introduction of FFP, and that whilst FFP rules were not intended to redress that imbalance, they are necessary for the purposes of ensuring that investments in football are targeted at the long-term. As sound as this position may appear, there is an intrinsic failure to admit that the effect of FFP would be to entrench the status quo rather than fostering a financial regime which does not amount to a one size fits all by imposing the same deficit limit on all football clubs regardless of their circumstances.